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Federal Trade Commission sues Nvidia to block its $40 billion Arm acquisition

December 2, 2021, 10:01 PM UTC

Nvidia’s proposed $40 billion deal to buy semiconductor design giant Arm may have just been derailed by the Federal Trade Commission.

The FTC said Thursday that it had sued Nvidia in order to block the computer chip giant’s acquisition of the U.K.-based company, announced in September 2020. The regulatory agency said that the deal would “harm competition” in three industries in which Nvidia’s products compete against Arm-based technologies. Those markets are autos, cloud computing, and data center networking.

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” FTC bureau of competition director Holly Vedova said in a statement. “Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets.”

Vedova added, “This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.”

An Nvidia spokesperson told Fortune in an email that the company “will continue to work to demonstrate that this transaction will benefit the industry and promote competition.”

Arm declined to comment.

Several giant tech companies like Microsoft, Google, and Qualcomm rely on Arm’s technology and related designs to build their own computer processors. These companies have reportedly complained about Nvidia’s proposed deal because of concerns that it would give Nvidia too much power within the semiconductor industry. Some of the acquisition’s critics believe Nvidia could increase Arm’s licensing fees if it were to own the company, and even prevent certain rivals from using next-generation designs.

The FTC alleged in its lawsuit, filed in its administrative court, that a combined Nvidia-Arm entity “would have less incentive to develop or enable otherwise beneficial new features or innovations if Nvidia determines they are likely to harm Nvidia.”

The Nvidia spokesperson said that the company is “committed to preserving Arm’s open licensing model and ensuring that its IP is available to all interested licensees, current and future.”

“NVIDIA will invest in Arm’s R&D, accelerate its roadmaps, and expand its offerings in ways that boost competition, create more opportunities for all Arm licensees and expand the Arm ecosystem,” the Nvidia spokesperson said. 

The United Kingdom said in November that it would start a probe of the deal to address potential antitrust concerns, just a month after the European Union’s executive arm, the European Commission, opened its own investigation.

“Whilst Arm and NVIDIA do not directly compete, Arm’s IP is an important input in products competing with those of NVIDIA, for example in datacentres, automotive and in Internet of Things,” said European Commission executive vice-president Margrethe Vestager in a statement.

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